EIU Global Forecasting Service

Global growth surges above 4%

Moderate probability, High impact; Risk intensity =

January 24th 2018Introduction

Strengthening growth in some large markets means that there could be a notable bump up of overall global growth.

Analysis

Economic data during 2017 have been strong in many parts of the world, including in Europe and a number of emerging markets. With upward adjustments to our China growth forecast for 2018, the stage is set for another year of robust global growth. This is likely to push global growth to about 3%, but not to 4%, as capacity constraints in the US and China, commodity price increases and monetary policy normalisation weigh on any stronger performance. However, there is an upside scenario. Even with the upward adjustment, our 2018 China growth forecast remains below consensus. There is a possibility that government stimulus efforts will enable the economy to perform even more strongly than we now expect. Although growth in India has fallen short of projections in 2017, performance remains robust, and Brazil and Russia have both exited recession. Overall, there is a prospect of stronger global growth driven by emerging markets (and Europe, to a lesser, but still important, extent). Growth surpassing 4% would be the highest level since 2010, when the global economy was awash with post-crisis stimulus.

Conclusion

A broad-based acceleration in growth would not only provide welcome relief to slow-growing countries elsewhere but could also assist in any longer-term economic rebalancing in China, making the whole process less painful. An improvement in global demand would provide further support for commodity prices, adding to an economically virtuous circle for commodity exporters in Latin America, the Middle East and Sub-Saharan Africa.